Avery & Sons v. Meikle & Co.

3 S.W. 609, 85 Ky. 435, 1887 Ky. LEXIS 61

• Court: Court of Appeals of Kentucky
• Decided: March 26, 1887
• Status: Published

Opinion

CHIEF JUSTICE PRYOR

delivered the opinion oe the court.

The original action was instituted in the court below by the present appellants, and an injunction obtained,, restraining the appellees from the nse "of appellants’ trade-mark upon certain plows, and to prevent them (the appellees) from selling their plows as the plows of the appellants. The chancellor below having denied the relief, his judgment was reversed, this court, upon the hearing, holding, that while the appellees had not used the trade-marlc proper of the appellants, they had so arranged or placed the letters and numerals used by the appellants on their plows, the plows of the appellees, and. with the same coloring and staining had so simulated their manufacture, as to cause their plows-to be taken and sold as those made by the appellants, and that an intentional violation of the latter’s right of property was in this way made to deceive the public, and to enable the appellees to sell their manufactures as-those of the Averys, the appellants.

This court said: “By skillful combination of legal particles, taken one at a time,' and in the aggregate leaving the mere trade-mark untouched, they have so confused its force and effect as to destroy its office and real efficiency to distinguish appellants’ plows from all others.” (Avery & Sons v. Meikle & Co., 81 Ky., 113.)

The right of the appellants to an injunction was finally determined, and the case remanded for further proceedings.

On the return of the case to the lower court, the-appellants asked for a reference to the commissioner, with directions to hear proof, and state an account of' damages between the parties by reason of the wrongful acts of the appellees. That the appellees be compelled to state the number of plows that had been thus simulated by them that were sold, and the profits made on the sales, and that they be compelled to produce their books, etc.

The court declined to make such an order, and the case having been transferred to the Law and Equity Court, that court refused to instruct the commissioner to report what profits the defendants (appellees) had made, but held that as the infringement of the property right had been committed by other means than the appropriation of the trade-mark itself, it was essential in equity as well as at law to show the fraudulent intent, and, therefore, the profits made by the appellees should not be the measure of damages, but the actual injury sustained by the appellants.

Under this view of the law as held by the chancellor, and followed by the commissioner, the appellants were only entitled to recover where the proof showed that the plows of Meikle & Co. had been actually sold as the plows of the Averys, and their being a failure in this respect, the damages were merely nominal, and no recovery except for nominal damages was allowed.

The appellants maintain, as this court had determined that the simulation was intentional, the wrongful appropriation of this property right of the appellants was consummated when their plows were sold by the appellees or their agents, and the profits realized constituted the criterion of damages in equity, when no .special damage was alleged or claimed by the appellants; while, on the other hand, the appellees insist that it was a mere tort, and the inquiry is limited to cases where the appellees have, in selling their plows, represented them in fact to be the plows of Avery. 'This is the real and only issue involved in the appeal. a

We do not understand that, in order to constitute a violation of the right of property in a trade-mark, it is necessary the trade-mark itself should be imitated, “but -where the simulation in every other respect is so made as to destroy the efficacy of the trade-mark, and to deceive and induce others to believe that the manufactured article is that of the real owner of the trademark, it then becomes as much a violation of the right •of property as if the trade-mark itself had been appropriated. Such was the decision in this case on the former appeal, and the intention on the part of the■■appellees in violating this right of the appellants was. then finally determined. The fraudulent intent with which the simulation was made having been already adjudged, it ’.sas not necessary, on the return of the •case to the lower court, for the commissioner, under an order of reference, to hear, or the appellants to offer, proof on that subject; but a simple reference to the commissioner to state an account of profits upon proof adduced, which, when correctly ascertained, would give to the appellants all the relief to which they were entitled.

In compliance with this order, the commissioner could call on the appellees to disclose the number of plows sold and the profits made, or appellants could establish the profits, if any, in some other mode. To require the .appellants to show an actual fraudulent representation made by the appellees to those who purchased their plows would, be impracticable, and result in permitting the wrong-doer to appropriate the property of another to his own use without rendering an account, as he would scarcely say to the purchaser, these plows I am 'selling were made by the Arterys. The law makes this; representation for him when he has imitated the manufactured article that he is selling so as to destroy the trade-mark, and enable him to sell it as the product of another.

While the profits made by the wrong-doer are not,, in a technical legal sense, to be termed damages, still many of the text-books, as well as some of the reported cases, in fixing the measure of damages in a court of equity in a case like this, say that the plaintiff is entitled to the profits, but not so at law; he may there recover more or he may recover less than the profits; realized. The fraud does not prevent a recovery of the profits in equity, as the plaintiff may not ask for more or be satisfied with less. Mr. Upton, in his work on Trade-marks, in discussing the rights of the plaintiff in a case like this, says : “It is a violation of the right of property in a trade-mark, which, upon the principles-established as the basis of the protection which the law extends to such property, will be suppressed by the extraordinary powers of a court of equity, and its fruits intercepted and restored.” (Page 214.) An example is given in this worl£ of a case analogous in almost every feature to the one before us, where, to-use the language of the author, “an elaborate simulation had been made, not to communicate the truth, but to escape the penalty of a falsehood.”

In appropriating this trade-mark by such a close imitation as to render it difficult for an ordinary observer to distinguish the one plow from the other, and then disposing of the plows to' the public, the appellees, according to a well-settled rule of equity, have applied the profits to their own use that justly belonged to the appellants, and it is not necessary to inquire, nor will the chancellor stop to inquire, whether or not the appellants could have sold their plows to the same parties. The trade-mark is his property; the manufacture the result of his skill, and when one undertakes by coloring, painting and so arranging his manufacture as enables him to virtually destroy the trade-mark of another and to sell his own as the product of the skill of the real inventor, it is as much a violation of the right of property in the trade-mark as if the trade-mark itself had been used. The appellants’ trade-mark is a Maltese cross, with the name or letters A. Y. E. R. Y. distributed in its arms and center. It is not pretended that this trade-mark appeared on the plows made and sold by the appellees, but the imitation in every other respect is complete, and, as was heretofore decided, made with the intent to invade the right of property in the trade-mark of the appellants. If so, the appellants are entitled to an account of profits. It has, in effect, destroyed the trade-mark, and enabled the one to sell his plows as the manufacture of the other.

This is not an action for damages by the Averys against Meikle & Co., by reason of the latter selling their plows as the plows of Averys. If so, the ordinary rule in regard to the measure of damages resulting from the tort would apply. It is an action in equity to restrain the appellees from the use of appellants’ trademark, and from m'aldng and selling plows which by certain devices and colorable imitation have been made to represent the plows of Avery & Co., and thereby destroyed ' their trade-mark or the right of property in it. It is a matter of doubt whether the averments contained in their equitable action are sufficient to make; it a good petition at law as an action on the case, the-prime object being the injunction to prevent the wrong; and when having the jurisdiction the chancellor will order an account of profits. The rule as to -the measure-of damages, or the relief to which the plaintiff is ordinarily entitled in such a case as this when in a court of equity, is to give as damages the amount of profits the-defendant made by reason of his wrong. The rule generally recognized as the true one. is to give as damages-the amount of profits the defendant shall have made by the infringement. (Browne on Trade-Mark, section 507.)

In this case it has been adjudged that the imitation was made with the design on the part of the appellees to-make profit by the deception, and we perceive no reason why the appellants should not have the profits, if they claim nothing more. This court cannot now, if so disposed, reconsider the question heretofore determined by requiring the plaintiffs to establish a deception that has already been adjudged to exist. In equity the wrongdoer is treated as a trustee in respect to the property, and is considered as holding the profits for the rightful owner. This rule applies as to patents,'and the elementary authors on the subject say: “ In trade-mark cases the-rule is much the same, but in the latter considerations-are involved which do not enter into ordinary patent infringements, as, for example, loss of reputation, so that courts allow greater scope in ascertaining damages.” (Brown on Trade-Marks.) “In equity,” says Mr. Sutherland in his work on Damages, “ where there is ground for invoking its jurisdiction, and an infringement has been found and decreed, and there has been no unreasonable delay in commencing suit, an account of profits will be decreed, which means the net profits the infringer has actually realized.” (Vol. 3, p. 631.) Mr. Upton on Trade-Mark says: “The order usually made by courts of chancery, that the defendant keep an account of the sales made by him, to the end that he-pay over the plaintiff the profits resulting from such sales, would seem to indicate a rule.” (P. 245.) While this author questions the wisdom of the rule, he substitutes no other for the guidance of the chancellor;, and certainly, where the intention to violate appears, and the party charged is acting mala Jides, he should not be heard to object to an account of profits. The Supreme Court, in the case of Root v. Railway Co., 105 U. S., 189, said: “When, however, relief was sought which equity alone could give, as by way of injunction to prevent a continuance of the wrong, in order to avoid a multiplicity of suits, and to do complete justice, the court assumed jurisdiction to award compensation for the past injury, not, however, by assessing damages, which was the peculiar office of a jury, but by requiring an account of profits, on the ground that if any had been made it was equitable to require the wrong-doer to refund them, as it would be inequitable that he should make a profit out of his own wrong.”

In the same case, citations are made from the opinions of Yice Chancellor Wigram, in Colburn v. Sims, 2 Hare, 543, and of Sir J. Leach, in Bailey v. Taylor, 1 Russ. & M., 329. In Colburn v. Sims, it is said: “The ■court does not accurately measure the damage, but as the nearest approximation it can make to justice, takes from the wrong-doer all the profits he has made by. his piracy, and gives them to the party who has been wronged.”

In Bailey v. Taylor, the ground for relief is laid down by the Master of the Rolls as follows: “The court {alluding to a court of equity) has no jurisdiction to give to the plaintiff a remedy for an alleged piracy, unless he can make out that he is entitled to the equitable interposition of this court by injunction; and in such case the court will also give him an account, that his remedy here may be complete. If this court do not interfere by injunction, then his remedy, as in case of ■-any other injury to his property, must be at law; unless1 that primary right to an injunction exists, this court has no jurisdiction with reference to a mere question -of damages.”

In the case of Graham v. Plate, 40 California, 593 the question as to the measure of damages was carefully considered, and hence has become a leading case. It was there argued that the entire profit should not be held to have originated from the wrongful use of the trade-mark, but that the intrinsic value of the article ■sold should enter into the question of value and thereby lessen the profits. The court, in response, said: ‘£ Every -consideration of reason, justice and sound policy demands that one who fraudulently uses the trade-mark of another should not be allowed to shield himself from liability for the profit he has made by the use of the trade-mark, on the plea that it is impossible to -determine how much of the profit is due to the trademark, and how much to the intrinsic value of the commodity. The fact that it is impossible to apportion the profit, renders it just that he should lose the whole.”

The case of the Leather Co. v. Hirschfield, Law Reports, 1 Equity, 298, claimed by counsel for the appellees to be analogous to this case, was where the plaintiff ■sued in equity as here, but elected not to take an account of the profits to which, by the decision in that case, he was entitled, but elected to claim damages by reason of the invasion of his right; and having done so, it was held that the burden was on him to show the extent of his injury, and the court would not assume as a matter of law that those purchasing of the defendant the simulated goods would have been the customers ■of the plaintiff.

The appellants in this case did elect to have an account of profits, and asked for a reference that such an account might be taken. The fact that they claimed damages did not preclude them from electing to take the profits. This was, in fact, the true criterion of ■damages in equity, where no other special injury was alleged or claimed. In fact, the cases of Neilson v. Betts, 5 English & Irish Appeal Cases, 1, and De Vitre v. Betts, 6 English & Irish Appeals, 319, referred to by counsel, establishes the rule that there can not be an inquiry as to damages and also an account of profits. The plaintiff is not entitled, as said in those •cases, “to an account of profits, and also an inquiry as to damages. That principle applies generally, and without any distinction at all. It applies to every case of infringement, andj therefore, it must be taken to have settled conclusively that _ point,, that the patentee must,, in all these cases, when he has a decree, elect whether he will have an account of profits or an inquiry as to-damages. He can not have both.”

In this case the chancellor refused to permit the: plaintiffs to elect, but compelled an inquiry as to the entire damage the plaintiff had sustained when he was; not asking for it. It is true-, the appellants asked for damages in their equitable action, but this did not confine them to such damages as a jury could give in an ordinary action for fraud. The chancellor should have-said, all I can give you in the way of compensation is an account of profits. You may elect to claim such damages as you have sustained, or take an account of profits. The plaintiffs asked for’an account of profits. They claimed nothing more. ^ YYe have found no case,, and been cited to no authority, where there has been a. violation of the trade-mark, and an injunction granted, where the party wronged has been refused an account of profits, unless he had first elected to claim the actual damages he had sustained, or delayed the assertion of his claim. In the case of Dobson v. Hartford Carpet Co., 114 U. S., 439, a case, however, unlike this, the plaintiff declined to take an account of profits.

In an action at law the measure of damages5 would be as insisted on by counsel for the appellees, and the authorities adduced in support of their views all conduce to sustain the jurisdiction of a court of equity, and the right of the appellants to an account of profits.

The plaintiff here had obtained his judgment or decree, restraining the defendant from a further invasion of his right. It was. adjudged that he had violated the rights of the plaintiff by appropriating his right of property to his own use, and the only question left for future consideration was the damages sustained. The plaintiff says, my damages in the forum I have elected to grant the relief sought, is the net profits the appellees have realized by reason of their wrong. To these profits he is entitled.

This is the doctrine of the text-books, and approved by the reported cases referred to by counsel on either side: “The net profits may be recovered in equity as profits made by the use of the plaintiffs’ property, and the defendant, as a constructive trustee, compelled to account for them. But at law only damages can be recovered, and they will be measured by the plaintiffs’ loss and not the defendants’ gain.” (Sutherland on Damages, volume 3, page 631.)

The rule laid down by Sutherland, and clearly stated, is the correct doctrine as to the criterion of damages, and while that general rule may not be applied to every case where there is an intentional appropriation-by the one of the other’s property by the use of the latter’s trade-mark, or so simulating the manufacture of one as to make it resemble that of the other, so as to destroy the property in the trade-mark, we perceive no reason for denying an account of profits. The aid of a court of equity has been invoked to prevent the further appropriation of the plaintiffs’ right of property to the use of the defendants. That relief has been granted, and the chancellor, at the instance of the plaintiff, will require the trustee to settle his accounts and account for the profits. The defendants occupy, in fact, the relation of trustees to the plaintiffs. The latter are the beneficiaries.

It is this principle, long recognized by courts of equity, that enables the chancellor to adjust the accounts between the parties, and give to the complainant that character of relief that he could not obtain in a common law court.

It is also urged by counsel for the appellees that the appellants have been guilty of such laches in the prosecution of their claim for profits as precludes the chancellor from giving any - such relief. The imitation in this case began first in the month of November, 1878, but was not made complete until some time in 1879; then the precise similitude appeared, and in some five or six months thereafter this action was instituted. So there was no laches on the part of the appellants, and would have been none if the similitude had been complete in the month of November, 1878, for then only fourteen months would have elapsed between the commission of the wrong in the first place and the bringing of the action.

Whether a lapse of time of less than five years would constitute a bar to the recovery of profits in equity is not necessary to be decided. There might be such an acquiescence on the part of the plaintiff as would amount to consent or work an equitable estoppel, but we find no such case presented by this record.

This case should, therefore, go to the commissioner, with direction to ascertain the number of simulated plows sold by the appellees from the time the simulation become complete, which was in the beginning of the fall of 1879, and the amount realized for them; the actual cost of the material used in the manufacture; the cost, which includes the hire of the employes in making the plows, allowing the use of the value of the tools, .machinery, power, and other facilities necessary for the manufacture ; expenses of selling and advertising; the value of the labor and superintendence of the work by the appellees themselves. These items, deducted from the amount realized from the sales, will leave the net profits, if any. If no profits, the damages are nominal only, as an election to take the profits has been made.

In some instances interest lias been allowed on the profits to the plaintiffs, but there are facts and circumstances existing in this case that authorize the chancellor to withhold interest, if such is to be regarded as the general rule.

For the reasons indicated the judgment is reversed, and the cause remanded for further proceedings consistent with this opinion.